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The Boomerang Gift

The current tax laws offer few opportunities to do well by doing good. A Charitable Lead Annuity Trust (CLAT) allows you to make a tax-free gift to your children while simultaneously making a recurrent and immediate gift to a charitable organization you support. Given the low interest rates, this is one of the best times in history to obtain the maximum benefit of this strategy.

After a specified number of years, the CLAT (a gift which may have grown substantially during the term of the trust) returns to your children completely tax-free. Thus, the original gift turns into a boomerang; benefiting your favorite charity each year then returning to benefit your family.

The Benefits

By choosing the proper amount to support the charity, and the correct number of years during which this annuity to the charity is paid, you potentially zero-out the gift and estate tax on an unlimited amount of wealth.

A CLAT is greatly magnified when property transferred to the trust is expected to rapidly appreciate in value over the term of the trust.

The growth of the trust assets over and above the amount paid annually to the charity keeps accumulating in the trust for eventual distribution to your children.

Since the gift and estate tax consequences of the CLAT are determined as of the date of death (for a testamentary trust) or at the date of the gift (for a lifetime trust), the value of the assets remaining in the CLAT at the time it terminates is immaterial for determining the tax consequences.

The greater the value of the assets transferred to the CLAT without gift tax consequences, the greater the amount eventually distributed tax-free to the children.

A CLAT provides you the ability to achieve the lifetime satisfaction of seeing your charitable goals accomplished without sacrificing your children’s inheritance.

Our Wealth Advisory Team will be glad to meet with you personally to discuss whether this strategy might fit into your overall Wealth Plan.